On Friday (March 3), prominent crypto Analyst Miles Deutscher highlighted the five “major crypto headwinds” creating fear among investors in the crypto market and shared his analysis of how each headwind affects the market.
The first headwind Deutscher highlighted is the Mt. Gox saga, with 142,000 BTC to be released this year. According to Deutscher, “It’s hard to provide an exact prediction due to the unpredictable nature of the related variables, but UBS strategists suggest that new supply will be ‘less concentrated’ as payments will be dispersed.”
The second headwind is the Ethereum Shanghai upgrade, which Deutscher notes has been delayed until early April. As a result, Validators will now be able to withdraw staked ETH from the Beacon Chain, creating amplified sell pressure. Deutscher anticipates the market will price in the impact via a pre-selloff, stating, “It’s likely the market prices in the impact via a pre-selloff.”
Deutscher’s third headwind is the troubles facing Silvergate Bank, one of the two major banks focused on serving the crypto industry (the other being Signature Bank). Silvergate Bank recently posted a $1b loss for Q4 2022 and announced a regulatory probe by the DOJ.
Because of Silvergate’s close connections with crypto firms and USDC, Deutscher believes there could be “downstream effects” if there is a “full-scale collapse,” which seems quite likely given how all major crypto exchanges are distancing themselves from Silvergate Bank. Deutscher warns, “Additionally, it may have ramifications for how other banking partners choose to integrate crypto firms.”
The fourth headwind is macroeconomic conditions, with recent CPI and PCE data increasing rate hike probabilities. The crypto analyst says that market futures now expect four additional interest rate increases by the Fed as the “base case,” with a 13% chance of rates climbing to 6% or higher. Deutscher thinks that CPI data on March 14th will influence the Fed’s decision on the 22nd.
Finally, Deutscher discusses the regulatory crackdowns happening in the crypto market. He cites the U.S. SEC’s recent actions against stablecoin issuers Kraken and Paxos as examples of the SEC’s “regulation by enforcement” approach toward crypto firms and says the SEC is currently focusing on staking products. He cautions, “Long term, it’s clear that regulation is needed. But the nature and severity of that regulation will determine how the market reacts.”
Earlier today, Deutscher said that Bitcoin is behaving like a stablecoin:
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